Production Sharing Rules and Optimality of Planted-Shared Farming Contracts
KOUAKOU Thiédjé Gaudens-Omer, KAMALAN Angbonon Eugène, PRAO Yao Séraphin

This article examines the optimality problem in existing "planted-shared" agricultural contracts. We define the optimality properties of a long-term contract when there is no agricultural credit market. We use a dynamic principal-agent model with bilateral engagement. This optimal long-term contract highlights two characteristics: first, the agent's remuneration depends on his productive performance; second, the martingale property of the production sharing index highlights his intertemporal smoothing. Moreover, we show that such intertemporal smoothing of the sharing index is a necessary and sufficient condition for the optimality of the long-term agricultural contract. Finally, among the existing contracts, the sharing rules such as the half sharing rate and the third part sharing rate are those that are close to optimal long-term agricultural contracts. Public authorities could promote this type of rules to meet the demand for securing "planted-share" contracts.

Full Text: PDF     DOI: 10.15640/jaes.v7n2a15